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Senior Citizen Opinions & Analysis
New Health Spending Data Not Cause for Celebration
U.S. still spends twice what other
industrialized countries spend per person; growth of 6.9%
outpaces inflation and growth in wages
By Karen Davis, President, Commonwealth Fund
 January 9, 2007 - Today’s release of new federal
data on health care spending by researchers from the Centers for
Medicare and Medicaid Services (CMS)* indicates that spending slowed for
the third straight year in 2005 and that health spending as a percent of
Gross Domestic Product held virtually constant at 16.0 percent, compared
to 15.9 percent in 2004.
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Opinions & Analysis for Seniors |
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The 6.9 percent increase in health care spending in
2005 (to $1.99 trillion) was the slowest rate of growth recorded since
1999. Prescription drug spending, one of the causes of a sharp rise in
spending several years ago, has slowed markedly. And the net costs of
private health insurance increased more slowly as premium and benefit
growth rates moved closer together.
While this may seem like good news, any celebration
is premature. The U.S. still spends a staggering $6,697 per person per
year on health care, more than twice what other industrialized countries
spend. And even the slower spending growth of 6.9 percent continues to
outpace inflation and growth in wages for the average worker in the
United States.
Indeed spending growth in many areas is still quite
worrisome: hospital care (7.9 percent) and—especially—home health care
services (11.1 percent).
The bottom line is that rising health care costs
continue to be a major concern. Individuals, families, businesses, and
governments all continue to bear the heavy burden of rising health care
costs. Moreover, we do not get good value for our health care dollar
compared to other countries, or even the best examples within the U.S.
The Commonwealth Fund Commission on a High Performance Health System’s
National Scorecard on U.S. Health System Performance revealed that
overall, the U.S. scores just 66 out of 100 on 37 key indicators of
health outcomes, quality, access, equity, and efficiency.
What is the solution? The Fund’s Commission has
noted that the U.S. needs to undertake a major drive toward value and
efficiency, and has described several steps to move toward a high
performance health system in this country. They include:
>> Increasing transparency and reporting on costs
and quality of care. These efforts, supported by the Administration and
leading experts, are essential for helping providers identify and adopt
best practices and for payers in rewarding the best performers.
>> Rewarding provider performance for quality and
efficiency. Medicare has demonstrations testing different approaches
with early promising results. Private insurers are increasingly
rewarding both medical groups and hospitals that provide higher quality
care, provide care more efficiently, and adopt modern information
technology. But central to their success is the availability of valid
information on performance. An excellent example is the General
Practitioner Contract in England—a major example of pay-for-performance,
which derives its data from the National Health Service electronic
information systems.
>> Expanding the use of information technology and
systems of health information exchange. There is no consensus about
whether health information technology would actually reduce overall
medical care expenditures for the U.S. health care system. However,
there seems little question that it would improve health system
performance and could potentially lower overall costs, depending upon
how well it is managed.
* A. Catlin, C. Cowan, S. Heffler, B.
Washington, and the National Health Expenditure Accounts Team, “National
Health Spending in 2005: The Slowdown Continues,” Health Affairs
Jan./Feb. 2007 26(1):142-153.
______________________________________________________________________________
Editor's Notes:
A new Data Brief from the Commonwealth Fund
Commission on a High Performance Health System, Health Care Spending: An
Encouraging Sign?, by Fund staff Stephen C. Schoenbaum, M.D., executive
vice president for programs and executive director of the Commission,
president Karen Davis, and research associate Alyssa Holmgren, to be
posted on the Fund's Web site January 10, provides additional analysis
of the new health spending data.
Click to Commonwealth Fund Website.
Related Commonwealth Fund publications:
S. Schoenbaum, K. Davis, A.L. Holmgren, Health
Care Spending: An Encouraging Sign?, The Commonwealth Fund, January
2007.
The Commonwealth Fund Commission on a High
Performance Health System, Framework for a High Performance Health
System for the United States, The Commonwealth Fund, August 2006.
The Commonwealth Fund Commission on a High
Performance Health System, Why Not the Best? Results from a National
Scorecard on U.S. Health System Performance, The Commonwealth Fund,
September 2006.
P. Fronstin and S.R. Collins, The 2nd Annual EBRI/Commonwealth
Fund Consumerism in Health Care Survey, 2006: Early Experience With
High-Deductible and Consumer-Driven Health Plans, The Commonwealth Fund,
December 2006.
B. Biles, L. Hersch Nicholas, B. S. Cooper, E.
Adrion, and S. Guterman, The Cost of Privatization: Extra Payments to
Medicare Advantage Plans—Updated and Revised, The Commonwealth Fund,
November 2006.
C. Schoen, R. Osborn, P.T. Huynh, M. Doty, J.
Peugh, and K. Zapert, “On the Front Lines of Care: Primary Care Doctors’
Office Systems, Experiences, and Views in Seven Countries,” Health
Affairs Web Exclusive (Nov. 2, 2006):w555-w571.
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